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]]>Referencing and assignment format: Given this assignment is a report style format, there is no requirement to advise the source of any materials
Assessment criteria: Assignments will be assessed against the SILOs for the assessment. In particular, assignments will be assessed based on objective demonstration of the following:
ACC3TAX Assignment
Case Study and Questions
Jingjing is a 25 year old employee who worked at Junnings as a Manager in Jeelong. She has engaged you for your services to assist her in preparation of her tax return for 2018/19.
On 20 April 2020, Jingjing sent you the following email:
From Jingjing Jyun <j.jyun@junta.com.au>
Sent : 20 April 2020, 9:00:52 AM
To : Tax Accountant
Subject : Tax Return 2018/19 – Jingjing JYUN
Dear Tax Accounting Team,
Sorry I have been putting this off – things have been so hectic and uncertain here in China this year. As discussed at our recent Zoom meeting, here are the following matters that should help you with your preparation of my tax return.
Issue | Law that applies, including Reasons (& Common Law/Taxation Ruling) | Amount ($)
Effect on taxable income |
Gross wages | Ordinary income under s 6-5, because they are monies received in exchange for service performed Dean & Anor 1997
(NB PAYG credit of $20,000 is applied in calculating tax payable) |
$66,000 |
Travel allowance | s15-2 ITAA97, s6-5 ITAA97
|
$10,000 |
Issue | Law that applies, including Reasons (& Common Law/Taxation Ruling) | Amount ($)
Effect on taxable income |
Selling property | Assessable income under s 102-5 because of net capital gain.
When Jingjing sells the house in 2012 for $500,000, (capital proceeds s116-20) there is a CGT Event A1 (s104-10). Therefore, capital gain calculation needs to be done. As it is an individual property partial exemption is also applied (s118-185 ITAA 97).
Capital Proceed 485,000 Less cost base (425,000) 60,000 Less 50%*Discount = 30,000 s 115-15 Capital Gain 30,000 Net Capital Gain: 30,000*(365/2,923) = 3,746.15
|
3,746.15
|
Issue | Law that applies, including Reasons (& Common Law/Taxation Ruling) | Amount ($)
Effect on taxable income |
Jing Jing Tax residency test | Only Australian residence taxation apply to all their
income even worldwide taxation s6-5(2) and s6-10(4) ITAA 97
Resides Test Applies to Jing Jing From the statement given Jing Jing lives in Australia since 2012 and under TR98/17, studying or working in Australia will meet the resides test therefore Jing Jing is considered to have passed the resides test.
Australia Domicile Test Applies to Jing Jing The establishment of a home in 2012 shows intention to stay and make Australia Jing Jing’s home
183 days Test Applies to Jing Jing Jing Jing has been working in Australia for 5 years thus, it is clear Jing Jing spent more than 183 days. Therefore, passed 183 days test.
Commonwealth Superannuation Test It is assumed that Jing Jing does not work for the government, since there is no statement of her working, therefore, fails this test.
Conclusion From the statements above, Jing Jing pass 3 tests hence a tax resident of Australia.
|
|
Selling property in Beijing
|
Capital Proceeds 195,000 Less Cost Base (160,000) 35,000 Less: CGT 50% Discount (17500) Capital Gain 17500 Net Capital Gain: 17500 *(305/1523)= 3504.60 |
|
Rent | ||
Defending Entitlement to Property
Issue with negative limb capital in nature |
||
Issue | Law that applies, including Reasons (& Common Law/Taxation Ruling) | Amount ($)
Effect on taxable income |
Private Health insurance Cover on Personal injury | FC of T v Dixon (1952) 86 CLR 540
Similar to medical doctor injured and received amount to personal disability insurance policy court held it was income in nature hence Jing Jing health insurance cover act also as income |
$3,000 |
Compensation for personal injury | Similar to Whitaker v FC of T 98 ATC 4285, compensation payments
for Jing Jing is treated as being capital in nature.
As form S 6-5 ITAA97, payment to replace lost earning for period of disability is fully assessable as it was not Jing Jing limb its assessable Golden rule- Principal of replacement |
$5,000 |
Issue | Law that applies, including Reasons (& Common Law/Taxation Ruling) | Amount ($)
Effect on taxable income |
Grooming and make-up expenses | Even though well-groomed is required for Jing Jing, Federal Court of Australia in Mansfield v. FC of T 96 ATC 4001; (1995) 31 ATR 367 clearly stated that grooming and make up are private expenses in nature therefore not deductible. | $4,000 (taxed) |
Clothing expenses | Unfortunately for Jing Jing, the clothing in question do not have property of protective in nature or logo of company to identify it as a deductible by div 34 ITAA 1997 thus a deduction is not allowed. | $5,000 (taxed) |
Dry Cleaning expenses | As the clothes do not meet div 34 ITAA 1997, cleaning expenses
cannot be claimed for it is non-compulsory (Div 34-14 ITAA 97). |
$960 (taxed)
|
That’s all I can think of for the moment – let me know if you need more information.
But can you please tell me how much tax I owe?
Issue | Law that applies, including Reasons (& Common Law/Taxation Ruling) | Amount ($)
Effect on taxable income |
Thanking you in advance. Stay at home and stay safe
Kind Regards
Jingjing J
Required
Format of your report. You must:
Issue | Law that applies, including Reasons (& Common Law) | Amount ($)
Effect on taxable income |
Eg.
Issue 1 |
Statutory Income under s xx-x because ……..
Law Because Reason Common law / tax ruling
|
+ $xxxxxx
|
In your discussion make sure you state,
For each of the major points address the sub-issues – for example there are four issues to discuss in Item 1 – Earnings from Junnings. Accordingly, follow the template below by
(20 marks)
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